Coal giant Peabody Energy won a round Friday in the battle over who gets to develop fossil fuels beneath a contested patch of Wyoming prairie: the coal firm or an oil and gas company.
A federal appeals board Friday rejected Berenergy Inc.’s attempt to prohibit Peabody from continuing to plug Berenergy’s wells while the dispute continues through appeals, either in court or before the Interior Board of Land Appeals.
The 8-year-old case of overlapping minerals has trudged through the court system, reaching an impasse at the Wyoming Supreme Court in January, when the high court asked the Bureau of Land Management — which oversees federal mineral leasing — to make a decision one way or the other.
BLM decided in August that the coal was simply more valuable than the oil. It favored Peabody, but required compensation to the oil company as well as set-aside money for Berenergy to use if it tries to produce after coal mining is complete. Peabody began plugging and reclaiming the wells in preparation for coal production. The oil firm then obtained a stay from the Interior and a restraining order from the U.S. Federal District Court of Wyoming that halted Peabody’s work.
That stay ended Friday.
The fact that both companies have rights to federal minerals is not up for debate. But the two industries can’t develop simultaneously. Either Peabody would have to wait for the wells to produce all the recoverable oil before digging the coal, or the oil firm would have to let its wells be plugged, then start over after Peabody has finished mining.
The Bureau of Land Management in August ruled in favor of Peabody’s right to recover the $1 billion worth of coal reserves over what the BLM estimates to be $477,000 worth of oil.
Berenergy’s wells are admittedly toward the end of their life. The company’s leases with the federal government were first obtained during the 1960s, according to the Interior decision. But the company argues that it has a right to finish production rather than step aside at a financial loss for the state’s largest coal producer.
“Our view is it’s a matter of property rights,” Berenergy’s lead attorney on the case, Peter Forbes, said an earlier interview with the Star-Tribune. “The U.S. government has to honor its contracts as well as anybody else.”
Peabody counters that continuing to avoid the wells at the North Antelope Rochelle mine outside Wright would cost the company $260 million.
Peabody supports the BLM decision from August, said Charlene Murdock, Peabody Energy spokeswoman, in an email.
“We will oppose all requests by Berenergy for a finding that the BLM decision is not valid or should not be effective,” she said.
Peabody’s mining plan advances on the location of the Berenergy wells from the north, south and east, with coal production reaching the wells later next year.
In justifying its decision Monday, the Interior Board of Land Appeals noted that Berenergy still maintains its rights to develop and that as part of the Bureau of Land Management decision Peabody was obligated to pay Berenergy $477,000 for the recoverable oil and put aside $13 million in escrow for Berenergy to start production again post coal production. Those terms are similar to a deal brokered by the District Court in Campbell County in 2015 that neither company approved of.
But, federal royalties in the amount of $100 million would be “delayed, reduced, or avoided” if a stay were in place until Berenergy and Peabody’s dispute makes it through the appeal process, the Interior Department stated.
The oil company had not decided as of Monday whether to press for the Interior Department to hear the case on its merits or turn to the courts again, said Forbes, the company’s lawyer.